Threshold hike for student loan repayments could see 75% written off

Theresa May's decision to raise the threshold for repaying student loans could lead to three quarters of them being written off and it would be simpler and fairer to cut tuition fees, a think tank has said.

The Centre for Policy Studies said raising the repayment threshold from £21,000 to £25,000 could lead to 60% of student loans being written off, potentially hitting 75%.

The Prime Minister announced the change at this month's Conservative Party conference under pressure to do more to win over young voters who backed Labour at the general election after Jeremy Corbyn promised to scrap tuition fees altogether.

But the think tank said Mrs May's plan would put a greater burden on future taxpayers, including today's students, as the Government currently expects a third of loans to be written off.

The "simplest and fairest alternative" would be lowering the upper cap on tuition fees to either £5,000 or £7,500 a year and to cut the interest rate charged throughout the term of the loan.

Alongside this, the original repayment threshold of £21,000 should be retained.

The think tank said the combined measures would lead to lower graduate debt and ensure the Government gets more of its money back as there would be fewer write-offs of student loans.

The shortfall in funding for universities should be met by central Government, the cost of which could be eased by separating cash for teaching and research and treating the latter as investment rather than spending.

A Department for Education spokesman said: "Our student finance system makes it possible for all young people, regardless of their background, to go to university.

"It ensures that costs are split fairly between graduates and the taxpayer and has helped more young people from disadvantaged backgrounds go to university than ever before.

"Increasing the repayment threshold from £21,000 to £25,000 puts more money in the pockets of graduates, lowering their repayments by up to £360 from the next financial year."